In the real estate world, a home appraisal that comes in lower than expected can throw a wrench into the home buying or selling process. Understanding how to effectively navigate this scenario is crucial for both buyers and sellers. Here’s a step-by-step guide to handling a low home appraisal.
Understand the Appraisal Process
Before taking any action, it’s important to understand what an appraisal entails. An appraisal is an unbiased estimate of a property's market value, conducted by a certified appraiser. This assessment is based on various factors such as the size, condition, and location of the property, as well as recent sales of comparable properties in the area (often referred to as “comps”).
Review the Appraisal Report
Start by requesting a copy of the appraisal report. Examine it thoroughly to check for any discrepancies or errors in the report, such as incorrect property details or omitted features that could affect the value. Make sure the comparables used by the appraiser are appropriate and relevant to your home.
Reevaluate the Comps
Compare recent sales in your area to ensure the comps used in the appraisal are accurate. If you find more suitable comps that suggest a higher value, gather this information as evidence which you or your real estate agent can present to the lender to contest the appraisal.
Request a Reassessment
If you believe the appraisal is undervalued, you have the option to request a reassessment. This involves providing additional data to the lender, hoping they will consider either adjusting the value or authorizing another appraisal with a different appraiser.
Negotiate with the Seller
In cases where the appraisal comes in lower than the agreed purchase price, buyers may need to negotiate with the seller. Options include asking the seller to reduce the price, splitting the difference, or considering alternative solutions such as seller financing or offering personal property as part of the deal.
Increase Your Down Payment
Sometimes, the simplest solution is for the buyer to make up the difference between the appraised value and the purchase price by increasing their down payment. This option maintains the original deal intact but requires additional out-of-pocket cash from the buyer.
Consider Switching Lenders
If all else fails, you may explore obtaining a mortgage through a different lender, which would result in a new appraisal being conducted. However, this can be a time-consuming process and might not guarantee a better outcome.
A low home appraisal doesn't have to derail your real estate transaction. By understanding the process, carefully reviewing the appraisal report, and exploring a variety of solutions, you can navigate this challenge effectively. For any further questions or guidance, consult with a real estate professional who can provide personalized advice based on your situation.
